Nagarro Se

Good afternoon everyone and thank you for joining us today for Nagara SE's Q3 9 month 2025 earnings call. Before we begin let me briefly explain how you can submit a question. During the presentation you can register a question by pressing star followed by 1 on your telephone keypad. If you change your mind please press star followed by 2. If you've joined us online you can submit a text question by the Q&A button on your browser. Please limit yourself to two questions initially. You may re-enter the queue and and we will return to any unanswered questions if time permits. With that, it is my pleasure to hand you over to Michael.

Great. Thank you, Sammy, and good afternoon, everyone. My name is Michael Knapp, and I'm part of the investor relations team at Nagaro. If you have not yet received a copy of our Q3 2025 earnings release, you can find it, as well as a copy of today's presentation, in the investor relations section at nagaro.com. Joining me today is Manas Human, our co-founder and custodian of entrepreneurship. Manas and I will be covering the results and strategic updates for the quarter. Before we begin, please note that some statements made during this call may be forward-looking and are subject to risks and uncertainties, as outlined in our earnings release. Additionally, please refer to the release for important information regarding non-IFRS measures. And with that, I'm pleased to hand you over to Manas.

Thanks, Michael. Once again, welcome everyone and thank you for joining us on this earnings call. We are taking a slightly different approach this quarter and hosting just one combined call so that we can expand on our prepared remarks a little and still have time to address your questions. We'll start by briefly highlighting our strong Q3 results, but perhaps even more importantly, underscoring the important and sustained actions we have been taking to address investor concerns, improve corporate governance, and enhance our financial reporting and transparency. I also want to discuss how we have set the stage to drive better shareholder returns through improved execution and a disciplined capital allocation strategy. The operational changes we have made are already driving measurable improvements in our results, which perhaps are being overshadowed a bit at this time by a subdued demand environment and FX noise. but we believe we are still at the very early stages of showing the benefits from some of these new initiatives and processes that we have put in place, especially on the sales execution side. I'd also like to talk more about the future and in particular about our vision of fluidic intelligence. We would like to explain that to you. We are promising our clients significant productivity improvements by unlocking the intelligence that already exists within their organizations We are removing barriers for our clients between their people, their data, their decisions, creating low friction enterprises that adapt faster and execute with clarity. And I'm excited to say that we're already seeing a very positive response from our clients around this promise, this theme of productivity improvements. And we will present an example of this. And finally, we'll be happy to take your questions. Now, we are pleased with our execution in Q3, which demonstrates the strength and resilience of our business model, despite all the ongoing macroeconomic challenges. Our teams delivered exceptional service to our clients, and we focused intently on operational discipline. During Q3, our revenue growth accelerated and was tracking to the guidance we provided last quarter. This is a testament to the stability of our customer base and the confidence our loyal customers place in us. Importantly, we're also seeing significant outperformance in profitability. Both our gross margin and adjusted EBITDA margin are ahead of expectations, reflecting the positive impact of the efficiency measures that we have implemented. In fact, the adjusted EBITDA margin of over 17% is the highest level we have seen since 2022. This margin expansion positions us well to generate strong earnings and cash flow moving forward. Over the past few quarters, we have prioritized making fundamental structural improvements to the way we operate. To that end, we've taken a number of decisive actions to improve corporate governance, financial reporting, and transparency. We're already seeing tangible improvements in our internal process and operations. I'll talk more about this shortly. But these changes are not simply about meeting regulatory requirements. They're about building a world-class company, about strengthening the foundation of trust and operational excellence that will support our growth ambitions for years to come. Our success is directly linked to our client success and we are intensifying our efforts to deliver quantifiable business impact to help them win in their markets. We're actively showing clients how we drive significant measurable improvements to their businesses. We aren't just selling hours, we are pitching outcomes. And importantly, clients are responding. The quality of our relationships is improving, evidenced by the increase in client satisfaction scores and the strong pipeline of new high-value contracts. This focus on value creation ensures that our services remain essential and deeply embedded in our clients' strategic initiatives. Finally, in line with our disciplined approach to capital allocation, we remain committed to enhancing shareholder returns. We are pleased to announce that we are extinguishing approximately 75% of our treasury shares and also buying back 20 million euro worth of stock. We believe there's a clear disconnect between the current share price and the intrinsic value of our shares. The current share price, even after today's jump, does not reflect our strong financial performance or expanding margins and improving operational structure. We believe the buyback program is one of several tools we are using to deploy capital while signaling our confidence in the company's long-term outlook. We are confident that as we continue to execute on our strategy, the market will recognize the sustainable value that Nagarro has been building, and in fact, has been building for a couple of decades now. Digging a little deeper into the numbers, we are pleased to report that our Q3 revenue growth reached 9.4% year-over-year at constant currency. This solid performance in a subdued demand environment keeps us on track with the revenue guidance we provided earlier. Turning to profitability, our focus on operational discipline continues to yield impressive results. Our Q3 gross margins came in at 33.1%, which is over 300 basis points better than the guidance that we have provided. This significant outperformance is a direct consequence of our increased focus on margin expansion through targeted initiatives, including the successful implementation of the margin support program that we have earlier talked about. This program has optimized resource allocation, improved utilization rates, and driven efficiencies across our organization. Our Q3 adjusted EBITDA margins were over 17%, which is above the high end of our guidance range. These strong margins are a clear highlight of our quarter, and underscore our deliberately improved operational efficiency and our ability to translate top-line growth into meaningful bottom-line results for our shareholders. And all in all, we are maintaining the guidance we provided last time. But when you look at our tracking to our guidance for 2025, please also keep in mind the significant headwind presented all year by foreign exchange rates, especially the conversion between dollars and euro, To put this in perspective, if we were to adjust our revenue for the full nine months to account for the foreign exchange impact from the dollar and euro, our revenue would be approximately 790 million, which would have placed us right near the midpoint of the initial 2025 full-year guidance that we had issued back in January 23rd. Further, as you will see on the next slide, if currency exchange rates had not moved, our adjusted EBITDA would also have been at or above the midpoint of the initial 2025 full-year guidance we issued in January. This ability to deliver what we promised at the start of the year, despite the highly volatile environment, underscores the fundamental strength of Nagaro's business and the fundamental strength of Nagaro's positioning in the market, and the fundamental strength of our relationships with our clients. Beyond these financial metrics, a long-term focus on delivering a superior client experience remains the primary driver of our sustained success, our commitment to our intimate partnership, innovation, and measurable outcomes for our clients. By deeply understanding their strategic challenges and exceeding their expectations, we ensure that our services remain indispensable and embedded in the long-term digital transformation roadmaps. We believe the quality of our client relationships is our most valuable long-term asset. We believe that we can double our revenues well within this decade simply by doing more for the 187 clients we already have today that generate more than 1 million euro in revenue, each with us.